The New York State Medicaid Lookback Period is one of the most obvious examples of how failing to plan can really hurt a family.
More and more, people find themselves and their family members struggling to pay for the costs of long term care. Sadly, nursing home costs are so high that after a while even the most seemingly “well off” families can find themselves turning to Medicaid to cover the cost of care.
The two most frequent problems I’ve seen as a funeral director are this: the family doesn’t understand that, when determining eligibility, New York employs a five year look back period for your assets. Many people confuse IRS gifting laws with New York Medicaid Lookback Period Laws. The IRS may allow you to gift away money without penalty, but those gifts are counted against you if they are made during the five year Medicaid lookback.
Even more heartbreaking, I see families fail to take funeral expenses into account when doing their “spend down” to become Medicaid eligible. It’s a scenario that plays itself out, over and over again throughout the state. A parent dies in a nursing home after having exhausted all of their assets, and instead of getting an inheritance, the children find themselves reaching into their own pockets to cover the cost of funeral and burial expenses.
There’s a great article which details how the New York Medicaid Lookback Period affects the estate planning process.
No one wants to, but it’s important to have difficult conversations with those you love, long before the need arises. Make sure those conversations include clear statements about what your wishes are, and how they will be paid for.